Why Toronto May Not Have a Multi-Billion Dollar Money Laundering Problem

Reporters have been publishing articles with scathing titles such as “Toronto’s real-estate market risky for money laundering, with $28B in opaque investments”.[1] This claim suggests that over $28 billion of illegal money has been washed through Toronto’s real estate. It also implies that our real estate market is propped up by illegal money.  This is simply not true and a dangerous oversimplification of Toronto’s ever-booming market.



While money laundering does occur in almost every real estate market, it isn’t the single greatest contributing factor to Toronto’s ever-booming market. Rather, there are a series of factors – from Toronto actually being a desirable place to live to low-interest rates. Due to this complexity, it’s unclear if Toronto’s real estate will cataclysmically go “bust” beyond regular market cycles if criminals stopped buying Toronto real estate. My skepticism stems from the fact that the report referred to in the above article (Opacity, Why Criminals Love Canadian Real Estate (And How to Fix It), authored by several groups including Transparency International Canada) has been misquoted. The $28 billion suggested as illicit money actually refers to $28 billion invested in real estate through corporations or trusts. In fact, the report states:


It is important to note that opacity is a risk factor and does not equate to evidence of money laundering. Rather, it provides an opportunity for dirty money to enter the legitimate economy undetected.


In no way does the report assert that, in fact, $28 billion actually was illicit. The report even admits that it is very difficult to determine which purchases are a product of money laundering versus business or tax planning. Accordingly, it’s negligent assume that $28 billion is syphoned through Toronto’s real estate and that government intervention will help with affordability.



The report further finds that in the last 11 years, “$9.8 billion in GTA housing was acquired by companies through cash purchases” and that billions of dollars worth of mortgages were provided by “unregulated lenders with no reporting requirements”. These findings are a cause for concern because if no one has to identify the source of the cash, then abuse can occur. Once again, however, this finding only highlights a gap (i.e. private lending) in the system that lends itself to possible criminal conduct. The finding doesn’t conclude that over $9.8 billion spent in Toronto’s real estate market was part of a money laundering scheme.


Notwithstanding my skepticism that Toronto’s prices are due to money laundering, there is no denying that “dirty” money is being used to buy real estate in Toronto. The solution, however, is not more regulation of real estate brokerages and real estate sales representatives as FINTRAC has already created a variety of audit and client identification requirements targeted at real estate businesses. Rather, the solution may be to create a land registry accessible only to government officials that requires numbered companies and trust funds to reveal their true identities. While I can imagine a whole host of issues related to privacy should this registry be made public, as suggested by the report, it may be the best solution to ensure transparency in the system without further taxation, complicated government policy and unnecessary regulation.


Written by Natalka Falcomer, JD, Vice President Corporate Development